Firm-Level Financial Resources and Environmental Spills
68 Pages Posted: 26 Apr 2018 Last revised: 6 Nov 2018
Date Written: October 27, 2018
Using novel US environmental spill data, we document a robust negative relationship between the number of spills a firm experiences in a given year and its contemporaneous and lagged (but not future) cash flow. In addition, studying two natural experiments, we find an increase (decrease) in spills following negative (positive) shocks to a firm's financial resources, relative to control firms. Overall, our results suggest that firms' financial resources play an important role in their ability to mitigate environmental risk and that such resources therefore affect communities in which these firms operate.
Keywords: financing constraints, environmental spills, non-financial stakeholders
JEL Classification: G32, Q53
Suggested Citation: Suggested Citation